ONGC Q3 profit beats estimates on write-back, forex gains

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ONGC-OILOil and Natural Gas Corp (ONGC) beat expectations with a 28 per cent rise in third-quarter profit on Thursday buoyed by a one-time provision write-back and forex gains from a weakened rupee.

However, a higher subsidies burden continues to squeeze margins on crude sales and raise concerns about the state company’s ability to finance a major investment programme.

ONGC this week agreed to raise $2.5 billion in overseas debt to help fund the acquisition of a 10 per cent stake in an offshore Mozambique gas block.

It is also looking to spend heavily to maintain output at ageing production fields in India.
“We are as concerned as you about our ageing fields. About three-fourths of our production comes from old fields of more than 30 years,” Chairman Sudhir Vasudeva told reporters.

India’s largest oil and gas exploration company posted net profit of Rs. 7,126 crore for the quarter to December 31, up from Rs. 5,680 crore a year earlier.

Net sales fell 1 per cent to Rs. 20,745 crore.

Analysts on average had expected the company to post a net profit of Rs. 5,820 crore on revenue of Rs. 22,370 crore.

With the crude oil it produces priced in dollars, ONGC made foreign exchange gains on an 11 per cent depreciation in the rupee in 2013.

Its forex gains in the quarter amounted to Rs. 3,022 crore, finance director Aloke Banerjee said.
The company also wrote back provisions amounting to Rs. 3,018 crore in the quarter, he said.

India caps retail prices of diesel, cooking gas and kerosene and state explorers such as ONGC and Oil India are forced to sell crude to state refiners at a fixed discount to global prices.

ONGC’s cost of helping subsidise domestic fuel prices rose 11 per cent year on year to Rs. 13,764 crore for the quarter. Lower international crude prices lowered its net realisation to $45.98 per barrel from $47.94 a year earlier.